Ukraine Proposes Up to 23% Tax on Crypto Income in New Scheme

Key Points:

• Ukraine's primary financial regulator has proposed classifying most cryptocurrencies as personal income for tax purposes, with potential exclusions for stablecoins backed by foreign assets.

• The proposed tax plan includes an 18% personal income tax rate, with an additional 5% wartime tax on certain crypto transactions.

• Transactions involving the exchange of one cryptocurrency for another would remain untaxed, similar to the approach in countries like Austria and France.

Ukraine's leading financial regulator is considering taxing cryptocurrency as personal income, with potential exemptions for specific foreign asset-backed stablecoins, according to a newly proposed tax framework released on Tuesday.

In a letter outlining the proposed approach, Ruslan Magomedov, head of Ukraine’s National Securities and Stock Market Commission (NSSMC), emphasized that a well-defined tax policy is essential to prevent financial misuse and promote the “legal and responsible use of digital assets.”

Magomedov also highlighted that establishing clear and fair tax rules is crucial for attracting investment and integrating Ukraine's virtual asset market into the global financial system.

According to the NSSMC's proposed tax framework, certain crypto transactions—such as those where non-stablecoin cryptocurrencies are converted to fiat currency or used for goods or services, and no financial losses occurred—would be taxed at Ukraine’s standard 18% personal income tax rate, with an additional 5% wartime levy that was introduced last December.

Crypto-to-crypto transactions would not be taxed under the proposed framework, which aligns with the approach taken by several European countries like Austria and France, as well as crypto-friendly jurisdictions such as Singapore.

Since Ukraine’s tax code already exempts income from foreign exchange transactions from taxation, the NSSMC has proposed that foreign asset-backed stablecoins and certain asset-referenced tokens (ARTs) could either have a preferential tax rate or be exempt entirely. The suggested preferential tax rates under this framework could be 5% or 9%.

The proposal also includes various tax options for other crypto activities, such as mining, which could be classified as a "business activity"; staking, which might be considered "business captive income" or taxed only when cashed out; and hard forks and airdrops, which could be taxed either as ordinary income or only at the cash-out stage.

In 2023, Ukraine introduced a draft law to amend its tax code to address cryptocurrency taxation. A 2024 analysis from Swiss blockchain analytics firm Global Ledger estimated that Ukraine could collect over $200 million in annual taxes from crypto transactions.

In 2022, Ukrainian President Volodymyr Zelensky officially legalized the country’s cryptocurrency sector, appointing regulators and authorizing the creation of detailed regulations. The National Bank of Ukraine is currently drafting legislation based on the European Union's Markets in Crypto Assets (MiCA) regulation.

Ukraine has been a candidate for European Union membership since 2022. 

The NSSMC has been contacted for a comment.